FAIR TRADE  - JEREMY LEFROY

In this article, I concentrate on fair trade in agricultural products as this accounts for the bulk of the turnover. There is also substantial fair trade in crafts and textiles

Fair Trade Today

Twenty years ago, fair trade was little known except to supporters of some development agencies. Pioneers such as Tearcraft, Traidcraft and Oxfam had already started to market crafts made by their partners. But the volume was small and for most agencies – Traidcraft being an exception – development work, not trade, was their main activity.

Today, fair trade products can be found in all major supermarket chains in the UK. It is estimated that the market for fairly traded goods exceeded £75 million in 2002, making the UK the second largest market in Europe after Switzerland.

What is fair trade?

There are many different forms of fair trade. The best-known in the UK is that which uses the standards set by the Fairtrade Labelling Organisation (FLO). But such has been the success of the fair trade movement over the past decade that many major companies, particularly in the coffee and cocoa/chocolate industry, have come up with ‘fair’ or ‘ethical’ trade schemes of their own.

Some are genuinely fair, others are not, although they may still constitute better practice than what had gone on previously. We can judge whether a product is indeed fairly traded by seeing if it conforms to the principles of FT. These are:

• A fair price, which at least covers the cost of production including the farmers’ own work.

• A long-term relationship between the producer and the user. Many of the products covered – coffee, for instance – take years to bear fruit. The farmers need assurance of fair prices for several years if they are to continue to invest in their crop.

• Credit is also important. Small farmers have few if any savings and they cannot usually borrow from banks. However they need cash throughout the year to buy fertilizer and pesticides and to pay for the school fees and healthcare for their families. They often borrow from moneylenders at very high rates of interest. Fair trade buyers therefore advance money to them against the security of their crop which they have contracted to deliver. By doing this, they ensure that the higher price which they pay is not swallowed up by the interest due to moneylenders.

• Finally, fair trade emphasises the transfer of knowledge and skills. Most groups of farmers produce considerably more than they are able to sell to the fair trade market. This is sold on the conventional market. But there is much which they can do to ensure that they receive the best prices available on the conventional market (see Box 2). Fair trade buyers can help train them. The farmers’ groups can in turn help the buyers by teaching them about the crop itself and by helping them to market it. Today shoppers like to know where their food and drink comes from. Café Direct, for example, make a point of introducing on their product labels individual farmers and the regions from which the product comes. There is little doubt that this helps sales.

          Why has fair trade increased?

The stimulus for the growth in fair trade was the collapse in the world market price for coffee in 1989. At the time, coffee was the second most valuable internationally traded commodity after oil with an export value in 1988/89 of US$9,221,000,000. That dropped to US$5,303,000,000 by 1992/93. Apart from short-lived recoveries in 1994 and 1997, prices have remained low ever since.

Coffee is a crop which is grown mainly by smallholder farmers on plots from 0.5-20 acres. The fall in the price of coffee therefore affected as many as 25 million growers worldwide. Since each would on average have at least 5 dependants, over 2.5% of the world’s population suffered (at the least) a halving of their main cash income.

In addition, many countries relied on coffee more than anything else to generate the foreign currency needed to pay for essentials such as oil imports and to service hard currency debts.

At the same time, it was becoming clear to many people that much of the bilateral and multilateral aid which was given to countries badly affected by the fall in coffee prices was ineffective. It was simply not reaching the people who needed it. Much of the aid was spent outside the country on consultants, vehicles or imported food. Those who thought that this money would eventually ‘trickle down’ through the economy to the needy were usually disappointed. It tended to stay with the wealthy and be spent overseas. Aid therefore in no way compensated for the losses suffered by farmers through the fall in the market value of their coffee. Aid also created dependence and resulted in governments undervaluing the work of their people. If dollars are readily available from the aid business, why should a government bother to encourage agriculture from which in any case most of the proceeds go to farmers and not to government?

Fair trade works the other way round, which is why it began to attract interest. By paying people properly for their produce, the cash would go to those who needed it most. It would then work its way ‘up’ through the economy. Farmers would be able to pay school fees and more teachers could be trained and employed. They would buy goods in nearby shops and so boost the local economy. Eventually tax revenues would grow and make the government itself less dependent on aid.

Until the end of the 1980’s, fair trade had largely been in crafts. But organisations such as Traidcraft, Oxfam and Cafod saw that there was a need to move into consumable items if fair trade was to grow. There are only so many craft items which you can keep in your home. Foods and beverages were the obvious market – in particular coffee, tea and cocoa/chocolate.

Fair traders also realised that they could not rely on the goodwill of the public to buy any fair trade item which was put on the market. One or two fair trade coffee products from the 1980’s had the reputation of being something which you bought once but never twice.

Consumers wanted to be sure of two things:

• That the quality of fair trade products was as good as, if not better than, equivalent conventional products;
• That the producer really had received a fair price and the other benefits of fair trade.

In addition, fair traders wanted to see the products available far more widely, not just through catalogues, market stalls and charity shops, vital though these would continue to be.

To gain the trust of consumers, the Fair Trade Labelling Organisation (FLO) was established. This set up a register of approved fair trade producer groups for a number of commodities (see box below). FLO also specifies the minimum price for the commodity and the other terms under which the buyers purchase from the approved group. Buyers are then able to use the official Fair Trade mark on the finished product.

Quality is not so easy to regulate. I may enjoy a wonderful cup of coffee which you consider undrinkable. Some fair traders decided that the only way to show the quality of their products was to sell them in supermarkets alongside those of their conventional competitors. This was tough. Shelf space is at a premium and most supermarkets were sceptical that fair trade products would sell.

However fair trade products have now made the transition to the mainstream of retailing in the UK. In most supermarkets you will find several fair trade products, including some which are under the store’s own label. The Co-op Group recently decided to convert all its own label chocolate products to fair trade.

Gaining access to supermarket shelves is one thing. Keeping them there is another. This requires a substantial marketing and distribution effort and that needs specialist skills. Oxfam, Traidcraft, Cafod and Twin Trading – all pioneers in fair trade – realised that they were not suited to running such an operation. So they set up Café Direct as an independent company which would do this work. It was a sensible decision. By co-operating, they have been able to use their scarce resources better; and by putting the operation into the hands of people who knew about the UK retail and catering markets, they have ended up with a professionally managed business which is taken seriously by the trade. In turn, it has left them able to concentrate on the work which they know best - working with the producer groups and assisting with development projects.

This approach is not without its critics. Some say that it is too commercial and that fair trade products should be sold exclusively through fair trade retailers. They also point out that large sums have to be spent on advertising which could otherwise have been paid directly to the farmers. But fair trade still represents only a tiny percentage of the total market, even for those products such as coffee in which much progress has been made. The aim of Café Direct and other firms which have pushed fair trade into the mainstream of retailing is to ensure that as many farmers as possible benefit from it.

What can we do?

If everybody in the UK spent just 50p per week on a fair trade product, sales would be £1,500 million per annum instead of £75 million.

To help this to happen, we need to

• Continue to develop fair trade products which people want to buy and which are part of their normal spending, not simply occasional purchases;
• Ensure that they are available in supermarkets, cafes, restaurants, churches, clubs, schools, universities, offices and factories. Sometimes it only requires you to ask for it to be available, sometimes a campaign is necessary.
• Continue to introduce friends and colleagues to fair trade and to the products.

The growth in fair trade is one of the most exciting things to happen in the commercial world in the past ten years. It brings people from very different backgrounds together; it helps to restore equality to relationships which have become distorted; and it gives renewed  self-confidence both to the customer who is now able to buy fair trade products when previously there was no opportunity to do so, and to the producer who is better able to provide for her/his family through their work.

Useful websites

www.fairtrade.net

www.cafedirect.co.uk

www.traidcraft.co.uk

www.twin.org (will be ready soon)

Jeremy Lefroy imports the Munguishi coffee which Christians Aware promotes and sells. The profits are used for lay training by the Diocese of Mount Kilimanjaro.  Jeremy is a coffee farmer.